Beiträge von Schwabenpfeil

    1. Nanik checks in from the Canary Islands:


    1. XAU and the HUI gold mining indices have a bullish falling wedge on their charts. That bodes well for a strengthening market.


    2. Both the XAU and HUI have an inverted head and shoulders pattern. The last time, I saw this inverted head and shoulders was when crude oil was around 36.- dlrs, and you saw where crude went: to 55 dlrs. But this inverted head and shoulders pattern is valid so long as the XAU and HUI remain above 93.- and 190 respectively. So far, this seems to be the case. In fact, the two indices are holding up pretty well.


    3. You will see the same inverted head and shoulders pattern in NEM-Newmont Mining, which is the bellwether stock of the gold share market.


    4. Silver is holding at its 200 day moving average. Every time, it holds this level, it rallies about 60 to 80 cents.


    5. If this pattern continues for another two weeks, we could have a positive market in February.


    Right now, there is a boxing contest going on between up pretty well. This reminds me of Sylvester Stallone in Rocky Three, when he faced a formidable opponent, took several blows and won in the last round.


    I feel gold will win this boxing contest in February.


    Best regards,
    Nanik

    Rhody on the lease rates:


    Good morning Bill:
    As you can see from the imbedded chart, gold lease rates are rising, particularly in the 1 to 6 month terms. This implies leasing to control spot prices. Your theory that this is designed to hold gold down during the inauguration of Shrub is a possibility. So is holding gold down prior to the G7 meeting next month as the US likely faces an ultimatum from its trading partners: fix the dollar or fix the deficits or the dollar will be allowed to free-float. There is a third possibility. The present price of gold at $422 is equal to $35 per ounce in 1960 dollars. Capping the price at this level means the value of gold has gone nowhere for 65 years. This is a message that I'm sure the Fed wants to broadcast. (Mind you if you adjust the DOW for inflation, it reduces to under 1000 too in 1960 terms) The point I am trying to make is that $422 gold is a price level that the Fed may be inclined to defend.


    Silver is still more expensive to lease than gold, but lease rates are stable here to slightly weaker. You can still lease gold for one year for the cost of leasing silver for one month. Despite this implied tightness in the silver supply, silver is far cheaper proportionately than gold. If the present price of gold is $35 in 1960 dollars, the present price of silver is 55 cents in 1960 terms. Gold was actually $35 in 1960, but silver was going through a weak patch then, averaging 93 cents. That makes silver at least 40% under-valued right now relative to gold.
    Regards, Rhody.

    Talk about confusion at the Fed:


    Greenspan against faster rate hikes - BusinessWeek


    NEW YORK, Jan 21 (Reuters) - Federal Reserve Chairman Alan Greenspan is comfortable with the current measured pace of U.S. interest rate hikes and does not favor a more aggressive policy, a report in the online version of BusinessWeek magazine said on Friday.


    The report noted that with the Fed's Feb 1-2 policy meeting fast approaching, investors were fretting that Greenspan and his central bank colleagues might want to junk their go-slow strategy of bite-size interest rate hikes in favor of something more aggressive.


    "But those concerns don't seem to have fazed the man atop the Fed," said the report, written by Fed watcher Rich Miller. "Associates say the chairman has shown no signs of panic and appears content with the strategy of small, slow rate hikes -- one-quarter of a percentage point at each meeting."


    "Indeed, with another quarter-point hike expected at the Feb. 1-2 meeting, short-term rates will be inching closer to levels where some Fed officials might even consider taking a break from their rate-hiking campaign," the BusinesWeek report said.


    Minutes of the last Fed policy meeting in December showed some board members were growing concerned about inflation and some fretted about excessive risk-taking in financial markets, leading analysts to wonder if the Fed as a whole might decide to speed up its rate hikes.


    However, recent comments from members have been more balanced, with many playing down the reaction to the minutes while expressing confidence that inflation will stay contained.


    -END-

    CARTEL CAPITULATION WATCH


    Oh boy is the US stock market looking putrid! Another early rally failed. The DOW even closed below psychologically key 10,400 support at 10,392, down 78. The DOG can’t sink fast enough. It barked its way down another 12 to 2034. What lies ahead is ominous:


    Dow set for worst new-year losing streak since '82


    NEW YORK (Reuters) - The Dow Jones was looking set to close lower for the week Friday -- marking the first time in more than 20 years it has fallen for the first three weeks of the start of a year.


    Dow Jones Indexes said the last time the Dow had fallen for the first three weeks of a year was 1982.


    A weak January could set the tone for the months ahead, said Robert Drust, managing director of listed trading at regional investment bank Wedbush Morgan.


    "It seems to me that it sets the tone for how people will position themselves for the coming months," he said. "I think traders have been disappointed with what's going on in January and will be more cautious going forward and less likely to buy on the dips."


    Heading into the final hour of trading, the Dow on track to end the week 1.2 percent lower, its fourth consecutive week of losses.


    -END-


    18:01 Semi equipment book/bill ratio 0.95 in December vs consensus 0.97
    * * * * *


    18:05 Follow-up: Semi equipment book/bill ratio 0.95 in December
    Bookings fell (7.1%) to $1.235B vs a consensus of (10.1%). Billings fell (2.6%)vs consensus (7.3%). November was revised to 0.99 from 1.00.
    * * * * *


    09:49 Univ. of Michigan Confidence 95.8 vs. consensus 97.5 Prior reading 97.1.
    * * * * *

    The John Brimelow Report
    Silver- I told you so. Now gold...


    Friday, January 21, 2005


    India was closed today – as were Indonesia, Malaya, and Singapore. This does not completely mean that Indian arbitrage dealers were inactive, but relatively speaking the fundamentals favored the Bears.


    TOCOM traded the equivalent of 16,375 Comex lots (+18%), with the active contract jumping 14 yen. World gold went out 10c above NY. Open interest dropped 183 Comex equivalent. Commentaries continue to imply that the physical market is a buyer: Reuters/Tokyo reports:


    “End-users and jewellery makers were detected buying spot gold around $420, traders said. Yen-based investors were also detected buying physical gold actively below 1,400 yen over the past week…Japanese bank depositors have been diversifying their assets into gold ahead of the end of a government guarantee on bank deposits at the end of March.”


    Right now this is not a massive thing, but it was extremely important in early 2002, and merits attention.


    Yesterday, on the slipstream of the Euro weakness, a fairly serious effort was made to break gold down. Mitsui-London:


    “The stronger USD saw gold test support in NY with players seeking out sell stops.”


    ScotiaMocatta:


    Gold started the session around 422.00 and soon came under pressure from overseas sources.


    Funds were also in the market on the offer side, however, good scale down physical buying helped soften the blow.” It failed. UBS clearly expresses the reason:


    “Physical comment: UBS notes that physical demand for gold remains very strong, particularly from India and other Asia although European demand is steady. Kilobar premiums have increased sharply and there is good demand for metal in Switzerland, indicating that the Swiss refineries are working hard. The strength of physical demand is underpinning the gold price…”


    The silver market bounce today is a pleasant vindication of the policy of watching physical market premiums.


    The noted bear appears to be faltering in his cheerleading for the US Administration. From such a sagacious observer, this is an important sign.


    JB

    "At 8:18 a.m. internet registration numbers were 5479. Our traffic flow chart indicates we will top 6000. The game is on."
    Joe Martin,
    Cambridge House International Inc.


    That is a big number. The joint will be jumping. If this is an indication of a sudden change in sentiment towards gold around the world, we have fireworks right around the corner.


    *As our STALKER source keeps reporting, the silver market is on fire overseas. The price action today finally gave us some indication of that. At one point silver was up 37 cents, quite the move. Should the silver shorts be hitting the wall (it’s about time), the price of silver could go bonkers very quickly. This will create a big stir and send more and more investors into gold.


    What a coincidence gold took off AFTER the Inaugural Festivities ended.


    Anyway, got to get this to press. Having pounded the table gold was going back up and why, today’s move higher will bring on more smiles from MIDAS this weekend, especially up here in gold country. As we all know, gold must take out and close solidly above $430. Thought it might do it last Friday. Looks like my call will be two weeks too early. Should get there easily by next Friday. Better late than never.


    Of significance is that two key commodities won’t go down. Oil rose $1.22 per barrel to $48.35, while copper closed at $1.4345, within striking distance of making multi-year and all-time highs.


    The dollar fell .59 to 83.34 with the euro rising .96 to 130.60.

    The cabal forces are in trouble for the following reasons:


    *The most important is the strength of the physical markets. It is eating into their available supply.


    *Gold has begun to move up in other currencies besides the dollar. Gold in euros closed below 327. If not for The Gold Cartel today, it would have topped 328.


    *The Gold Cartel obliterated the specs. Over 100,000 of them exited the gold market during the orchestrated drubbing. Many will come right back in again as the technicals turn back up. With the cash market this firm, the cabal will have their hands full and could be faced with several back to back limit-up days on the Comex. Limit, of course, being within the confines of the $6 Rule.


    *The US stock market is breaking down and is giving up much of its gains of last year, in some cases plus some already. Should this continue and pick up steam, it will make their rig that much harder.


    *In addition, as I have mentioned several times recently, should US financial markets get roiled (it's coming), more and more investors in the West are going to look to gold as a go-to investment in 2005, further complicating life for the bums.


    *As an indication of how sentiment can shift very quickly, one only need read this comment from Joe Martin this morning about his Vancouver conference this weekend:

    January 21 - Gold $426.50 up $4.80 - Silver $6.79 up 27 cents


    Gold And Silver Take Off


    "The mountain remains unmoved at seeming defeat by the mist."
    Rabindranath Tagore


    Just checked into the Pan Pacific Hotel in Vancouver. Been traveling all day. When I left Dallas gold was up a piddly 60 cents and I was doing my Billy Martin routine (he was the former New York Yankees manager who kicked the bases like a maniac when the umpires made a bad call). For me it is my reaction to The Gold Cartel.


    What a pleasant surprise to see my kicking did some good for a change. The Gold Cartel got a whooping, yet still made their presence felt with their $6 Rule again. At its high of the day, gold was up $6.80. Once again let me express how ludicrous it is for a market to be kept in check with such precision over the years now and to have no one outside of the GATA camp make note. How sickening! And how pathetic the mainstream gold pundits are to have to maintain their PC gold market commentary so as not to offend The Gold Cartel.


    Oh well, a day to focus on the positives. Feeling better about my calling the market here after getting my butt wupped for the past month. One day does not make a market change, but what I was ranting about in December seems to be coming to pass. The stock market is finally giving up the ghost for the reasons I have expressed in this column for well over a month. The surging gold and silver physical markets have saved the day and made life miserable for The Gold Cartel who so desperately wants to keep the price from taking off.

    This is a dated yet easy-read piece; however, it hits home with me i.e. what has been running through my mind the past year or two:


    DADDY, WHY DID WE HAVE TO ATTACK IRAQ?


    A year 2003 story ...


    Q: But after we invaded them, we STILL didn't find any weapons of mass destruction, did we?


    A: That's because the weapons are so well hidden. Don't worry, we'll find something, probably right before the 2004 election.


    Q: Why did Iraq want all those weapons of mass destruction?


    A: To use them in a war, silly.


    Q: I'm confused. If they had all those weapons that they planned to use in a war, then why didn't they use any of those weapons when we went to war with them?


    A: Well, obviously they didn't want anyone to know they had those weapons, so they chose to die by the thousands rather than defend themselves.


    Q: That doesn't make sense Daddy. Why would they choose to die if they had all those big weapons to fight us back with?


    A: It's a different culture. It's not supposed to make sense.


    Q: I don't know about you, but I don't think they had any of those weapons our government said they did.


    A: Well, you know, it doesn't matter whether or not they had those weapons. We had another good reason to invade them anyway.


    Q: And what was that?


    A: Even if Iraq didn't have weapons of mass destruction, Saddam Hussein was a cruel dictator, which is another good reason to invade another country.


    Q: Why? What does a cruel dictator do that makes it OK to invade his country?


    A: Well, for one thing, he tortured his own people.


    Q: Kind of like what they do in China?


    A: Don't go comparing China to Iraq. China is a good economic competitor, where millions of people work for slave wages in sweatshops to make U.S. corporations richer.


    Q: So if a country lets its people be exploited for American corporate gain, it's a good country, even if that country tortures people?


    A: Right.


    Q: Why were people in Iraq being tortured?


    A: For political crimes, mostly, like criticizing the government. People who criticized the government in Iraq were sent to prison and tortured.


    Q: Isn't that exactly what happens in China?


    A: I told you, China is different.


    Q: What's the difference between China and Iraq?


    A: Well, for one thing, Iraq was ruled by the Ba'ath party, while China is Communist.


    Q: Didn't you once tell me Communists were bad?


    A: No, just Cuban Communists are bad.


    Q: How are the Cuban Communists bad?


    A: Well, for one thing, people who criticize the government in Cuba are sent to prison and tortured.


    Q: Like in Iraq?


    A: Exactly.


    Q: And like in China, too?


    A: I told you, China's a good economic competitor. Cuba, on the other hand, is not.


    Q: How come Cuba isn't a good economic competitor?


    A: Well, you see, back in the early 1960s, our government passed some laws that made it illegal for Americans to trade or do any business with Cuba until they stopped being Communists and started being capitalists like us.


    Q: But if we got rid of those laws, opened up trade with Cuba, and started doing business with them, wouldn't that help the Cubans become capitalists?


    A: Don't be a smart-ass.


    Q: I didn't think I was being one.


    A: Well, anyway, they also don't have freedom of religion in Cuba.


    Q: Kind of like China and the Falun Gong movement?


    A: I told you, stop saying bad things about China. Anyway, Saddam Hussein came to power through a military coup, so he's not really a legitimate leader anyway.


    Q: What's a military coup?


    A: That's when a military general takes over the government of a country by force, instead of holding free elections like we do in the United States.


    Q: Didn't the ruler of Pakistan come to power by a military coup?


    A: You mean General Pervez Musharraf? Uh, yeah, he did, but Pakistan is our friend.


    Q: Why is Pakistan our friend if their leader is illegitimate?


    A: I never said Pervez Musharraf was illegitimate.


    Q: Didn't you just say a military general who comes to power by forcibly overthrowing the legitimate government of a nation is an illegitimate leader?


    A: Only Saddam Hussein. Pervez Musharraf is our friend, because he helped us invade Afghanistan.


    Q: Why did we invade Afghanistan?


    A: Because of what they did to us on September 11th.


    Q: What did Afghanistan do to us on September 11th?


    A: Well, on September 11th, nineteen men, fifteen of them Saudi Arabians, hijacked four airplanes and flew three of them into buildings, killing over 3,000 Americans.


    Q: So how did Afghanistan figure into all that?


    A: Afghanistan was where those bad men trained, under the oppressive rule of the Taliban.


    Q: Aren't the Taliban those bad radical Islamics who chopped off people's heads and hands?


    A: Yes, that's exactly who they were. Not only did they chop off people's heads and hands, but they oppressed women, too.


    Q: Didn't the Bush administration give the Taliban 43 million dollars back in May of 2001?


    A: Yes, but that money was a reward because they did such a good job fighting drugs.


    Q: Fighting drugs?


    A: Yes, the Taliban were very helpful in stopping people from growing opium poppies.


    Q: How did they do such a good job?


    A: Simple. If people were caught growing opium poppies, the Taliban would have their hands and heads cut off.


    Q: So, when the Taliban cut off people's heads and hands for growing flowers, that was OK, but not if they cut people's heads and hands off for other reasons?


    A: Yes. It's OK with us if radical Islamic fundamentalists cut off people's hands for growing flowers, but it's cruel if they cut off people's hands for stealing bread.


    Q: Don't they also cut off people's hands and heads in Saudi Arabia?


    A: That's different. Afghanistan was ruled by a tyrannical patriarchy that oppressed women and forced them to wear burqas whenever they were in public, with death by stoning as the penalty for women who did not comply.


    Q: Don't Saudi women have to wear burqas in public, too?


    A: No, Saudi women merely wear a traditional Islamic body covering.


    Q: What's the difference?


    A: The traditional Islamic covering worn by Saudi women is a modest yet fashionable garment that covers all of a woman's body except for her eyes and fingers. The burqa, on the other hand, is an evil tool of patriarchal oppression that covers all of a woman's body except for her eyes and fingers.


    Q: It sounds like the same thing with a different name.


    A: Now, don't go comparing Afghanistan and Saudi Arabia. The Saudis are our friends.


    Q: But I thought you said 15 of the 19 hijackers on September 11th were from Saudi Arabia.


    A: Yes, but they trained in Afghanistan.


    Q: Who trained them?


    A: A very bad man named Osama bin Laden.


    Q: Was he from Afghanistan?


    A: Uh, no, he was from Saudi Arabia too. But he was a bad man, a very bad man.


    Q: I seem to recall he was our friend once.


    A: Only when we helped him and the mujahadeen repel the Soviet invasion of Afghanistan back in the 1980s.


    Q: Who are the Soviets? Was that the Evil Communist Empire Ronald Reagan talked about?


    A: There are no more Soviets. The Soviet Union broke up in 1990 or thereabouts, and now they have elections and capitalism like us. We call them Russians now.


    Q: So the Soviets, I mean, the Russians, are now our friends?


    A: Well, not really. You see, they were our friends for many years after they stopped being Soviets, but then they decided not to support our invasion of Iraq, so we're mad at them now. We're also mad at the French and the Germans because they didn't help us invade Iraq either.


    Q: So the French and Germans are evil, too?


    A: Not exactly evil, but just bad enough that we had to rename French fries and French toast to Freedom Fries and Freedom Toast.


    Q: Do we always rename foods whenever another country doesn't do what we want them to do?


    A: No, we just do that to our friends. Our enemies, we invade.


    Q: But wasn't Iraq one of our friends back in the 1980s?


    A: Well, yeah. For a while.


    Q: Was Saddam Hussein ruler of Iraq back then?


    A: Yes, but at the time he was fighting against Iran, which made him our friend, temporarily.


    Q: Why did that make him our friend?


    A: Because at that time, Iran was our enemy.


    Q: Isn't that when he gassed the Kurds?


    A: Yeah, but since he was fighting against Iran at the time, we looked the other way, to show him we were his friend.


    Q: So anyone who fights against one of our enemies automatically becomes our friend?


    A: Most of the time, yes.


    Q: And anyone who fights against one of our friends is automatically an enemy?


    A: Sometimes that's true, too. However, if American corporations can profit by selling weapons to both sides at the same time, all the better.


    Q: Why?


    A: Because war is good for the economy, which means war is good for America. Also, since God is on America's side, anyone who opposes war is a godless un-American Communist. Do you understand now why we attacked Iraq?


    Q: I think so. We attacked them because God wanted us to, right?


    A: Yes.


    Q: But how did we know God wanted us to attack Iraq?


    A: Well, you see, God personally speaks to George W. Bush and tells him what to do.


    Q: So basically, what you're saying is that we attacked Iraq because George W. Bush hears voices in his head?


    A. Yes! You finally understand how the world works. Now close your
    eyes, make yourself comfortable, and go to sleep. Good night.


    Q: Good night, Daddy.

    Well, it’s nothing to write home about, but the gold shares are resisting going down too much more. They could have been belted along with the general market today and they came back with a, "NO MAS."


    At least the HUI did, closing up .15 to 204.45. The XAU dipped .41 to 93.52. Gold and silver bulls are hard to find. You got one here.


    Off to Vancouver early in the morning.


    GATA BE IN IT TO WIN IT!


    MIDAS

    New gold web site:


    Dear Mr. Murphy,
    As a dedicated subscriber to Le Metropole Café (eric.lemaire@sicrelemaire.fr) I have had, for a long time now, the pleasure to read your daily articles and must thank you for opening my eyes and introducing me to many aspects of the economic and monetary issues of our times.


    But please let me introduce myself : I am a 41 years old French businessman with various mundane businesses with no relation to finance. My educational background is Law, Political Science and Business Administration and I have had the chance, 25 years ago to be an exchange student for a year in a delightful family in Birmingham, Ala.


    I have decided to do implicate myself and contribute to spread the Gold and Silver story in Europe, where it seems it has been lost for a couple of generations. To achieve this objective, I have launched a new website whose objective will be to teach and inform its readers of the monetary and political issues of the world, and of the Gold and Silver issues.


    It is a free site, simultaneously launched in three languages : English, French and Spanish. Each site is divided in three parts : Editorials, News and Technical Analysis, and news from mining companies.


    I have the ambition for this site not to be the work of an educated amateur, but to be professional in its approach and its objectives. I have no political agenda, no other objective than to form and inform, and no other financial objective that eventually have the site pay for its expenses.


    I shall be in Vancouver at the Resource and Investment Conference this week-end to launch this site, for meeting people, for personal interest and eventually to sell a few banners for the site.


    I would be honoured to meet you and thank you in person not only for the extraordinary work and dedication you have had over the years at Le Metropole, but especially for all what you have brought to me.


    In the meanwhile, if you have a second to look over it, here is my new website :


    http://www.24hpm.com


    Precious metal, 24 hours a day


    You open the French and Spanish sites by clicking on the links. The site will open automatically in French in the French speaking countries, and in Spanish for the Spanish speaking countries.


    I am test launching it this week, so I would be extremely grateful of any suggestions to improve it.


    Hoping to have the chance to salute you in Vancouver.


    With my best regards
    Eric Lemaire


    Good luck Eric and look forward to meeting you in Vancouver.

    Speaking of Fannie Mae:


    Fed Gov Poole rips Fannie in this recent speech:


    http://stlouisfed.org/news/speeches/2005/1_13_05.html


    Perhaps they are trying to distance themselves from what is rapidly turning into a very foul-smelling mess. This week's GSE Report says that the Bush administration decided to go after Fannie because they didn't want another Enron during their 2d term, although this has the potential to be much worse.


    Pool warns:


    In my speech to the OFHEO conference almost two years ago, I emphasized the risk of systemic, world-wide financial crisis should either Fannie Mae or Freddie Mac become insolvent.


    The word "crisis" appears at least 10 times in this article, along with discussions of fat tails and Mandelbrot's work on fractal price movements.
    Robert Blumen

    More goodies from:


    The King Report
    M. Ramsey King Securities, Inc.
    Thursday Jan. 20, 2005 – Issue 3080 "Independent View of the News"


    Wednesday was an ugly day for bulls – with technicals turning even uglier.


    Bubblevision ‘experts’ were in a state of disbelief yesterday. They bemoaned that the stock market fell when the economic data was so wonderful.


    Au contraire bubble boys & girls! The big drop in jobless claims has little to do with job growth. Data shows no wage or job growth. The drop in jobless is due to the exhaustion of unemployment benefits.


    All day pundits extolled the wonderful housing start figures. Unfortunately, housing starts continue to soar (highest level in 7 years) even though mortgage applications and sales are faltering. Last year, we repeatedly warned that housing starts some months were about twice the pace of sales. Elementary math mandates a supply problem; and that’s what has unfolded. We also noted regularly that builders will continue to build as long as Easy Al remained promiscuous, no matter the inventory.


    The Newtonian concept of inertia applies here. A trend will resist change until a requisite amount of force is imparted on it. Easy Al is now trying to gently tap the brakes on his speeding roadster.


    Yesterday, Wall Street shills and fin media dolts heralded the absence of inflation as indicated in the CPI. As we have stated, 2004 was a seminal year in the perception of economic data. CPI and PPI were so askew with reality that an increasing number of people realized just how bogus government economic statistics have become. When we were screaming about Slick’s BLS venality, few people cared or heeded our warnings. We served as background amusement to soaring stock valuations. But after the bubble burst, the religion of bogus government economic accounting gained traction.


    Ironically, if-when housing prices fall, the CPI will NOT reflect the decline even thought its depressing effect will impact the economy. About 1/3 of CPI is housing prices as reflected by imputed rent, not actual housing prices. Rents are not likely to fall as fast or as far as housing prices in a recession….


    Warren Buffett, on CNBC yesterday, said that over the past year his businesses have seen "huge increases in raw material prices’; and he expects further inflation and a lower dollar.


    These are the exact problems that vex Easy Al. Over a year ago, we warned that inflation and the lower dollar would force Easy Al to raise rates even though the US would be ebbing. It is now occurring.


    If you’re looking for the real ‘new paradigm’, it’s exogenous forces to the US influencing commodity prices on a global basis. This means the US economy can contract while commodity prices increase. This cannot occur in many economic models. But then again, reality is a beach.


    Fannie Mae cut its dividend in half in order to comply with new imposed capital requirements. The only thing keeping FNM and other financial stocks from tanking is investors are conditioned to believe that rallying bonds are good for financial stocks. They will soon learn that the forces(s) that can cause a bond rally can also cause economic & financial problems that become manifest in decimated financial assets.


    Though most economists, traders and pundits are and have been negative on the bonds, Mr. Bond keeps rallying. Asian central bank buying, principally by the BoJ, kept bonds buoyant in 2004. In November, selling from perceived tax-haven countries, ergo hedge funds, hit a record $22.99B of US Treasuries according to recently released US Treasury data. The same month, Asian countries ex-Japan bought a record $15.78B of US Treasuries.


    The past few months, softening global economic data impelled some investors into bonds. The January stock market swoon is also forcing bond buying. If the stock decline gathers momentum in the coming months, the bond market is likely to be the receptacle of the selling proceeds. This will further vex bond bears. But, after investors and traders flee to bonds solely because they’re not stocks, the conditions will be ripe for Mr. Bond to tumble. But by then most bond bears will be exhausted…


    So far, 2005 is proceeding as we guessed with one major exception. There is little or no cash flowing into mutual funds to start the year. For the past decade or so, people and PMs learned to commit pension cash as quickly as possible in the new year to capture as much of the expected big Q1 rally as possible.


    We figured that January would be bleak, at least in the first three weeks. But, other Januarys that started on the downside tended to have a good rally the final week when PMs committed the new cash. This might not occur because of the absence of new funds with cash levels already at record lows.


    Furthermore, February could be a very telling and disturbing month. Forget about meager cash flowing into funds in February. The horror would be if redemptions occur. For the past two years, consumers either received or expected to receive tax refunds. With Bush safely elected and no refunds or rebates due, consumers might have to tap savings to pay for Christmas and other bills….


    -END-

    Fed will move aggressively to guard inflation-Poole


    TUPELO, Miss, Jan 20 (Reuters) - U.S. price pressures appear well controlled, but the Federal Reserve will move aggressively to protect low inflation if necessary, Fed Bank of St. Louis President William Poole said on Thursday.


    Poole noted that core inflation had come in slightly below what the central bank's policy-setting Federal Open Market Committee (FOMC) had expected for the second half of 2004.


    "Recent data, then, suggest that inflation is well controlled. The FOMC has emphasized that it is prepared, if necessary, to move more aggressively to protect the relatively low rates of core inflation that now exist," Poole said in a prepared speech to a Mississippi forecasting conference.


    Poole said forecasts for economic growth -- as measured by gross domestic product (GDP) -- of 4 percent to 4.5 percent in 2005 were "pretty reasonable", but he warned high productivity and increased globalization may limit job creation.


    "It seems likely that labor market conditions will continue to improve and that monthly employment gains will probably exceed by a comfortable margin the roughly 125,000 per month necessary to keep the unemployment rate constant," he said.


    "It's an open question, though, whether we will return to the days when monthly employment gains of 200,000 per month or more were the norm, as they were during the last two business cycle expansions."


    Job gains averaged about 186,000 a month in 2004, for total employment growth of 2.2 million, according to Labor Department figures.


    -END-

    CARTEL CAPITULATION WATCH


    The DOW had no oomph at all, closing at 10,471, down 68. The DOG was hammered again, dropping 28 to 2046. A break below 2,000 would be psychologically devastating to Wall Street bulls. Efforts to keep the US stock market buoyant going into and out of Inauguration time failed.


    US economic news:


    10:00 Dec. LEI reported 0.2% vs. consensus 0.2%
    Prior reading revised to 0.3% from 0.2%.
    * * * * *


    NEW YORK, Jan. 20 /PRNewswire/ -- The Conference Board reports today that the Composite Index of Leading Economic Indicators increased 0.2% in December, following a 0.3% increase in November and a 0.3% decline in October.
    Says Conference Board Economist Ken Goldstein: "After five straight declines, the leading economic indicators turned around in November and December. The coincident index remained positive. So too has the so-called shadow index -- the ratio of coincident to lagging indicators. This reflects a positive shift in the balance of forces -- a more positive picture in the last two months than in the prior five months. Although retail sales were modest in December, investment in equipment and homebuilding remain strong segments of the economy."…


    -END-


    12:00 Philadelphia Fed Index reported 13.2 vs. consensus 25
    Prior reading revised to 25.4 from 29.6.
    * * * * *


    12:01 Follow-up: Philadelphia Fed prices paid index 66.1 vs. 53.8
    New orders index 9.8 vs. 20.9
    * * * * *

    The John Brimelow Report


    Gold is rallying in Euros; Two important AS ideas


    Thursday, January 20, 2005



    Indian ex-duty premiums: AM $8.39, PM $8.29, with world gold at $422.70 and $421.55. Very ample for legal imports.


    PM silver in India, by which time world silver was down to $6.53, had an ex-duty premium of 46c. Premiums in the upper 40s in the first week of this year triggered the air freighting of metal to India, a very rare event. Silver’s downside would seem to be limited.


    Reuters comments from the Far East today diverged unusually widely from the subsequent market tone


    "SINGAPORE, Jan 20 (Reuters) -Investor buying at lower levels helped gold defy a firming dollar on Thursday and could boost its chances of breaking free from the current $421 to $424 an ounce range, dealers said.


    "I think there are physical buyers getting in at these levels...just under $423," said one dealer in Singapore.."


    TOKYO, Jan 20 (Reuters) –"… prices were supported by bargain-hunting… "We saw a lot of buying when gold fell to near 1,380 yen so we are not too worried about seeing it fall sharply from the present level," said Hiroyuki Kikukawa, associate director at Nihon Unicom Corp.'s research section."


    TOCOM is fact only traded the equivalent of 13,924 Comex lots (-5%). The active contract closed down 2 yen, but world gold went out 40c above NY. Open interest rose 768 Comex equivalent lots. Mitsubishi implies that the public increased their long by 2.1 tonnes. Quite possibly the key element in Japan at present is quiet buying of physical at 6-month low yen prices. (NY yesterday traded 46,054 lots. Open interest rose 414 lots.)


    Yesterday, elements in NY tried to utilize a rally in the Euro to boost gold: running it up $2 in the first 30 minutes, $3.60 above the previous NY close. Whatever they encountered there completely demoralized them, and Refco Research too, which sold its’ 421 Feb gold long of the past week – bought with a $432 objective - on today’s opening. It appears the 100-day moving average has a formidable guardian in NY.


    Nevertheless, gold in Euro terms has being resolutely edging up all week, in sharp contrast to the soggy performance since late November. Of course the primary physical buyer currencies are either fixed to the dollar – the Gulf – or independently firm (India) so were the Euro to soften this action would be to be expected, contrary perhaps to conventional commentary.


    JB

    *Bonds could do anything. Foreigners could easily begin to dump, sending rates much higher. Yet, the economy could sink enough to keep rates low like they are now. Hard to say.


    Naturally, this commentary leads me to gold which is going to be the go-to investment in 2005. As it is now, demand is surging in all parts of the word. Except in the West, thanks to the efforts of the heinous Gold Cartel whose intention to dampen any sort of gold investment enthusiasm has worked perfectly to-date. However, as the US stock market sinks and the real estate bubble bursts (for reasons oft-discussed in The Café), Western investors are going to take a much harder look at gold – for other reasons than the dollar weakening.


    The bums have pounded Gold for 7 weeks now. While all rallying efforts have failed, it seems to want to hold around $420. Still think we have bottomed.


    Can’t recall ever seeing this before. The physical market was strong enough this morning to take gold up to $422.90, 50 cents higher on the day. Yet, the most The Gold Cartel would let gold rise in the US was up 10 cents, or 40 cents BELOW where the cash market was trading in London. That is how bad they wanted to cap gold during the Inauguration festivities.


    Of minor interest here is the different basis Kitco uses for the spot price versus thebulliondesk.com and another site I use. Kitco has been running 50 cents under both for some time now. Not sure why and if it has anything do to with a stronger physical market in Europe. In the end, it doesn’t matter.


    The euro gold price began to break out today, climbing above 326 at one point, before settling back to 325.43.


    The gold open interest rose 423 contracts to 276,043.


    Silver continues to confound. The most successful trader on the floor over the past few years is very bullish. Our STALKER sources in London tell us word is out that some known big players plan to make a play for silver at the end of the second week of February. Got me as to the why of the timing. Meanwhile, it dorks around.


    The silver open interest went up 511 contracts to 99,473.

    The dollar, on the other hand, continues to rally. It closed at 83.93, up .29. The euro fell .33 to 129.70, while the yen caved back to 103.33.


    The reasons bandied about for the dollar strength is talk of foreign corporation profit/dollar repatriation to take advantage of the lower tax rate now available and that the euro is really no good. Another is talk of higher US interest rates due to action taken by a vigilant Fed. Meanwhile, none of the higher rate talk impresses the bond traders. March closed at 114 6/32 and is not that far from making new highs. This does not square with the dollar action (and predictions of much higher US interest rates) at all.


    Something is not right. Whatever market manipulations are going on behind the scenes, we are seeing signs they are beginning to lose their effect – the most notable being the steady stock market plunge. What it is leading to is a scenario predicted for some time by a number of those who live on our planet:


    *The stock market is in big trouble and is likely to go much lower. The fiscal/Iraq problems are too much to deal with now without some drastic reduction in living standards by the average American.


    *The dollar could do anything short-term, but as Warren Buffet just stated again, it has nowhere to go but down. The US must deal with the Iraq/fiscal mess and the solutions won’t be pretty.

    Following E-Bay’s trouncing last night, resulting from missing their expected quarterly profit number and lowering guidance, the US market came in lower with the DOG quickly dropping 20+ points. Wall Street bulls and the PPT kept defending DOW 10,500 and took the DOW up on the day at one point. However, there is too much bearish pressure building out there and the effort to take the DOW back up above 10,500 again even failed late in the day.


    The stock market is playing out as it should. What lies ahead for the US economic scene based on big picture market factors is rather bleak. The good news, which puffed up our economy and stock markets the past couple of years, is behind us. The Administration and Fed are spent. It has been a good dance; now it is time to pay the fiddler.


    The fact that the US stock market is failing so badly during January is significant this year because it signifies that Wall Street bulls have put their faith in what lies ahead in the wrong planet-type thinking. US fiscal measures necessary to get our financial house in order are critical to keep foreign creditors from fleeing in droves and sending our interest rates through the roof. The ramifications of those measures are negative for the US economy.


    Technically the US market is in the process of completing a significant top. Should the DOW take out 10,400, it could get very ugly:


    http://futures.tradingcharts.com/chart/DW/X